Marine economics and weird music

Joris’ latest adventure

Joris Luyendijk is one of my favourite journalists. As a student he stayed in Cairo for a year, which resulted in a very insightful book on the views of young Egyptians. As far as I know the book only appeared in Dutch, but its title is roughly translated as “A good man sometimes hits his wife”, which is a quote of one of his female (!) fellow students who insisted she would leave a man who did not occasionally hit her. After working as a correspondent in the Middle East he made many people lose their faith in foreign journalism with his book “People like us: Misrepresenting the Middle East”. He is a bit of a maverick in journalism world.

But now he has traded the Middle East for another battle field: banking. His blog on the Guardian website features several in-depth interviews with people working in what must be the most hated industry of our time. I must admit it gets tedious after a while: most of the interviewees insist they are doing very complex stuff, they work insane hours, what they are doing is very different from those cowboys down the street so don’t accuse them of gambling away your pension money, bla bla bla. You can also put question marks over the goals of the blog. Although it is presented as an anthropological study I doubt whether an anthropology journal would accept a paper on such a biased sample of the population (or I would lose faith in anthropology as much as I have in foreign journalism). The interviewees come to Joris on a voluntary basis, whereas most bankers (anyway the most high-ranking ones) have signed all kinds of non-disclosure contracts with their bosses. So the ones coming to Joris are either frustrated with their current or former employers, or they are foot soldiers with little insight into what happens at the top. And how many bankers read the Guardian? (How many social workers read the Wall Street Journal?)

Nevertheless it is an insightful blog as it gives at least a glimpse of what it must be like to work in banking. What strikes me most is the diversity in companies, products and jobs, and the culture that seems to combine gung-ho chauvinism (it’s not an easy working environment for women) with almost perfect colour blindness (several bankers from Asian or African descent say what they like most about the sector is its ethnic diversity). But more insightful than the interviews themselves are the comments. Some are from those few bankers who do read the Guardian, and their views help looking at the content from a different angle. The sheer vitriol expressed by the majority of commenters, however, is another interesting learning experience – at least now I know about the Peterloo Massacre. Apparently, to the average Guardian reader, bankers bathe in the blood of little children to keep their skin smooth. Or something like that.

My views tend to be on the boring side of this debate. As most interviewees stress, banking is a hugely diverse sector. Holding all bankers responsible for the current mess is like holding all manufacturing responsible when a fireworks factory blows up. This does not mean there is nothing wrong with some sectors within banking. Greg Smith’s j’accuse against Goldman Sachs illustrates that there can be huge information asymmetries in banking, i.e. one party in a transaction knows a lot more about the product being sold than the other party, which opens the possibility for a lot of rip-offs. My economics textbooks tell me that competition should drive out the not-so-knowledgable parties in favour of the well-informed ones. It does not explain, however, why this does not happen. In my view all kinds of market failures (transaction costs, mostly) and the fact that many of the less knowledgable parties are governmental bodies make that there are still plenty of suckers (‘muppets’ in banker lingo) around. Economics has ignored this fact for too long: we should do more field work, observe what happens, and develop a better understanding of factors like transaction costs, information asymmetry, and so on.